A young man started a business with nothing and swept the Japanese market with gum and chocolate. He invested much money earned from Japan in South Korea and made a big business based in South Korea and Japan. The enterprise is now ranked fifth in South Korea with annual sales of 83 trillion won, 10 million employees and more than 80 subsidiaries now. This young man named the enterprise after Lotte, the heroine who wins all hearts in ‘Die Leiden des jungen Werthers’, a famous novel by Goethe. This young man’s name was Shin Kyuk-ho, and a strong wind now blows in his enterprise Lotte.
  The eldest son of Shin Kyuk-ho, Shin Dong-ju, who managed the Japanese Lotte, was dismissed as a major executive by his father in December, 2014. The following year on July 15th, news that the second son of Shin Kyuk-ho, Shin Dong-bin, who managed the Korean Lotte, will manage Lotte was spread. Shin Dong-ju travelled to Japan with his father and dismissed his older brother on July 27th this year. The next day, Shin Dong-bin opened a meeting with the board of directors and dismissed his father and hence had a confrontation with his brother.
  The two sons’ versions were different. Shin Dong-ju, who minded media exposure, gave an interview before coming to Korea on July 29th. He said that his brother rebelled and made public his father’s directions of dismissing his brother.  Shin Kyuk-ho let his eldest son return to business management, but his brother publicly opposed that.
  Shin Kyuk-ho’s recordings and documents, which have an advantage for Shin Dong-ju, were released on July 31st. His brother said that he didn’t accept the decision, because it was improper and he wanted a proper decision according with commercial law. The dark aspects of Lotte were exposed through this situation and antagonized many people.
  The things that antagonized many people are the management structure and the identity of Lotte. The holding company of Korean Lotte is Lotte Hotel. 12 L investment companies, which are located in the Japanese Lotte office, have 74% shares of Lotte hotel, and this shows that Japanese Lotte dominates Korean Lotte, which is 20 times larger than the Japanese Lotte. The name of the holding company in Japanese Lotte is Gwangyunsa, which is a mysterious and strange company. The strange thing is that Gwangyunsa dominates Lotte. It shows the feudal management structure of Lotte. Lotte is an unlisted company, so the financial structure and business structure weren’t known well. This allows one person to dominate the company. Many people see Shin Kyuk-ho as the king who is stronger than the board of directors, even though he has only 0.05% shares. The recordings and interviews show that owner’s family is unfamiliar with speaking Korean. The incidents lower many people’s opinions of the Lotte owner’s family, which is the identity of Lotte in Korea.
  Finally, Shin Dong-bin was supported in an extraordinary meeting of shareholders on August 17th, but Lotte has many problems with cross-shareholding, the owner’s dogmatic decision-making and immoral management. Politicians are discussing conglomerate reform and proposing a bill about problems that were exposed through Lotte’s situation. This situation has given negative images  of Lotte to the global press and investors, and this is against the nation’s long-term interests. People who love Lotte were disappointed. Many civic groups conducted a Lotte boycott campaign on August 15th. A wholesale and retail worker said, “After Lotte’s situation, many citizen associations conducted a Lotte boycott campaign, so share prices declined, but Lotte sales were not affected by the campaign. I think that the campaign wasn’t promoted well and Lotte is too big in the consumption market.”
  Lotte is facing fundamental problems and is carefully considering countermeasures. Politicians have long talked about conglomerate reform and sought a solution. People also have a stable interest in conglomerates and they want to see the government and enterprises solve the conglomerate problems well. Enterprises should find and solve their own problems. Enterprises must change themselves before losing the confidence of the people and exposing embarrassing personal matters.

By Woo Hyun-gi
hg36@cbnu.ac.kr